CENTRAL EXCISE TARIFF ACT, 1985

TAXATION LAW

AMIT GROVER
BBA LL.B(H) SECTION B
SEMESTER 8
A3221515130
Table of Contents

1. Introduction

2. Central Excise Law and Acts

3. Levy and Collection of Excise Duty

4. Goods and Excisable Goods - Definitions

a. Goods
b. Excisable Goods
c. Classification of Goods

5. Schedules of Central Excise Tariff Act

INTRODUCTION

Taxes (derived from Latin word „Taxo‟) are a great source of revenue to the
Government. Taxes (Direct or Indirect) are levied (imposed) and collected by the
authority of law as per Article 265 of India constitution. This Article empowers the
competent authority (Union and State government) to collect these taxes.

As per seventh schedule to the constitution of India consists of 3 lists for setting out the
matters under which the Union and State have power to make laws:

1. List-1(Union List): only central government has power to make laws in these
respects.

2. List-2(State List): only state government has power to make laws in these respects.

3. List-3(Concurrent List): both state and central government has power to make laws
in these respects.

MEANING OF EXCISE DUTY

Excise Duty or tax is defined as a type of tax/duty, to be collected from a producer or

manufacturer with regard to the commodities produced or manufactured. The word
Excise duty has been derived from a Latin word called “Excisum” which denotes to cut
out. An excise duty is a charge on the production or manufacture of goods. Now excise
duty is known as CENVAT (Central Value Added Tax). Entry No. 84 of Union List has
empowered the Union Government to impose Excise duties on Tobacco and other goods
manufactured or produced in India excluding the following:

a) Liquors, making use of alcohol and used for human consumption/utilization. But if
alcohol has been used as a constituent for Medicinal and toilet preparations then Excise
duty has to be imposed on them.

b) Opium, narcotics, etc.

CENTRAL EXCISE LAWS AND ACTS

Excise Act was introduced in 1944 known as “Central Excise and Sales Tax Act 1944”.
But before 1944 there were only 16 individual acts which can be levied excise duty.
All acts that were in existence prior to 1944 were consolidated and a new act called
“Central Excise and Sales Tax Act 1944” was formed and this act formally came into
existence on 28th February. 1944. Again in 1966 it was renamed as Central Excise Act.

Broadly, the Central Excise Law comprises the following:

 Central Excise Act, 1944

 Central Excise Tariff Act, 1985

 Central Excise Valuation Rules, 2000

 Central Excise Rule 2001 for “Removal of Goods at Concessional Rate of Duty
for Manufacture of Excisable Goods‟.

 Central Excise Rules, 2002

 CENVAT Credit Rules, 2004

 Central Excise Rules 2005 for Compounding of offences

 Central Excise Rules, 2007for settlement of cases

 Central Excise- Rules 2008 Determination of Retails Sale Price of Excisable

Goods)

Central Excise Act, 1944

The Act includes the basic provisions in respect to the levy of excise duty, valuation,
power of authorities, penal provisions etc.

Central Excise Tariff Act, 1985

This Act includes the list of goods which are subject to Central Excise Duty and has 96
chapters and Two schedules.

First schedule contains all excisable goods

Second schedule contains goods selected from the first schedule and make them
subject to additional duty.
 Central Excise Valuation Rules, 2000

These are the valuation methods that have been prescribed to evaluate excise duty
wherein transaction value is not determinable under section 4.
Central Excise Rules, 2002

These rules are regarding the procedure for the computation and collection of duty
which consists of other procedures like-mode of payment of excise duty, registration
and maintenance of records, rebate of duty, invoicing, export without payment of excise
duty etc.

CENVAT Credit Rules, 2004

CENVAT Credit Rules, 2004 came into existence after replacing CENVAT-2002 rules
which provide for extending credit across goods and services wherein the procedure for
availing CENVAT credit on goods and services have been mentioned. After the
amendments in 2005, 2006, 2007, 2008, 2009, Now these rules are known as CENVAT
credit (Amendment) Rules, 2010.

Central Excise (settlement of Cases) Rules, 2007

These rules provide the policy and practice (procedural aspect) for settlement of cases
before the “Settlement Commission”

LEVY AND COLLECTION OF EXCISE DUTY

Levy and Collection of Excise Duty has been prescribed under Chapter II of Central
Excise Act, 1944 and section 3, 4 & 4A deal with charging and collection of taxes.

Section 3 deals with charging of excise duty

Section 4 explains the valuation methods of excisable goods
Section 4A deals with valuation method based on “Maximum Retail Price”
(MRP).
Section 3(1) states:
“These duties shall be levied and collected in such a manner as may be prescribed”

a) The goods that have been produced and manufactured in India- a duty of
excise on all excisable goods {excluding goods produced or manufactured in
 special economic zone (SEZ)}, are to be levied on the basis of the rates
prescribed for them in the First Schedule to the Central Excise Tariff Act,1985.

b) A special duty of excise, on excisable goods (excluding goods produced or

manufactured in SEZ) are to be levied on the basis of rates prescribed in the
Second Schedule to the Central Excise Tariff Act, 1985.

GOODS AND EXCISABLE GOODS DEFINITIONS

1. GOODS:

The term “goods” has not been defined properly in the Central Excise Act. But “Article
366(12) of the constitution of India” define goods as “goods includes all materials,
commodities and articles”.

Section 2(7) of the Sales of Goods Act, 1930 defines goods as “every kind of movable
property other than actionable claims and money; and includes stocks and shares,
growing crops, grass and things attached to and forming part of the land which are
agreed to be served before sale or under the contract of sale”.

“UNION OF INDIA Versus DELHI CLOTH AND GENERAL MILLS CO. LTD 1977
(1) E.L.T(J 199)”

As per the judgment of the Supreme Court of India in the above-mentioned case, goods
are the article that must be capable of coming in the market to be bought and sold. Hence
Goods should be articles that are movable and marketable.

The two key features of the term “goods” are

(a) Movability

(b) Marketability

a. Movability

• Manufacture or production is associated with movables.

• Immovable property like buildings, bridges are not said to be manufactured or

produced rather they are constructed or built.

According to Section 3(26) of the General Clauses Act, 1897

“Immovable property shall include land, benefits to arise out of land, and things attached
 to the earth, or permanently fastened to anything attached to the earth.” Therefore, no
excise duty is charged on building, roads or any other immovable property.

b. Marketability

Marketability of a product is the capability of a product of being put into the market for
sale Any article, material or substance which is capable of being bought and sold for a
consideration then such gods shall have deemed to be marketable. Marketable only
means “saleable” or “suitable for sale”. Goods need not be actually sold.

2. Excisable goods

According to Section 2(d) of the Central Excise Act, 1944

“Excisable goods” means “goods specified in the 1st and 2nd Schedule of the Central
Excise Tariff Act,1985 as being subject to a duty of excise and this includes salt.”

Conditions for excisable goods

In order to be classified as excisable goods, two conditions needs to be satisfied

The conditions are listed as below:

 The goods must be mentioned in either 1st or 2nd schedule of the central excise
tariff act, 1985

 The goods which are mentioned must be subject to duty as per tariff.
In other words, the goods will be classified as non-excisable if they are not
mentioned in either of the two schedules
Thus, it can be said that non-excisable goods are:

 Goods which are not mentioned in schedules of the central excise tariff
act, 1985

 If listed in the said act but no rate is specified for such goods.

3. Classification of goods

Calculation of excise duty on goods is done by identification of goods through

headings and sub-headings and determination of rates of duty under each heading and
sub-heading.

Classification is important for establishing the duty rate which is applicable on goods
as each good is subject to different rate of duty. Moreover, classification of goods is
also used to identify exemptions if any.
Schedules of Central Excise Tariff Act

First schedule: first schedule consists of 96 chapters and 20 sections which further
contains the rates of basic excise duty leviable on various goods. Each chapter is
subdivided into “headings” and “sub-headings” on the basis of different types of goods
belonging to same class of products.

Second schedule: it depicts the item on which special excise duty is leviable.

Third schedule: it enumerates the goods in relation to which packing, re- packing,
labelling, re-labelling, MRP or treatments of goods to render them marketable shall
amount to manufacture.
“Central Excise Tariff Act, 1985” is based on the “Harmonised System of
Nomenclature”. This system is a product coding system which is acceptable
internationally and formulated under the auspices of the” General Agreement on tariff
and taxes